Floating charge is not a mortgage deed for stamp duty when enforceability arises only on crystallisation.

An instrument creating only a floating charge over a company's assets does not amount to a mortgage deed for stamp duty purposes unless it effects a present transfer of an interest in specified property. Because the charge here was expressly contingent and became enforceable only on crystallisation upon specified events, it did not create a present encumbrance over identified assets. The earlier decision was distinguished on the ground that the security there was immediately enforceable. The deed was therefore held outside Section 2(17) of the Indian Stamp Act, 1899, and not chargeable under Article 40(b) of Schedule I.

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Issues: Whether a trust deed creating only a floating charge over the company's assets, which crystallises on specified events, is a mortgage deed exigible to stamp duty as a mortgage under Article 40(b) of Schedule I of the Indian Stamp Act, 1899.

Analysis: A mortgage, in general law as well as within the inclusive definition of mortgage deed in Section 2(17) of the Indian Stamp Act, 1899, requires a present transfer of an interest in, or creation of a present right over or in respect of, specified property. A floating charge, by contrast, does not immediately fasten upon particular property as a present encumbrance. It becomes enforceable only upon the occurrence of the stipulated contingency, when it crystallises and may then attach to available assets. The instrument in question expressly described the security as a floating charge and made enforceability dependent on specified events. The cited earlier decision was distinguished because the charge there was enforceable immediately and was not contingent upon crystallisation.

Conclusion: The trust deed was not a mortgage deed within Section 2(17) of the Indian Stamp Act, 1899, and was not chargeable under Article 40(b) of Schedule I.

Final Conclusion: The reference was answered against the Revenue, holding that a contingent floating charge is outside the stamp duty provision applicable to mortgage deeds.

Ratio Decidendi: An instrument creating only a floating charge, which does not create a present interest in specified property and becomes operative only upon crystallisation, is not a mortgage deed for the purpose of stamp duty under the Indian Stamp Act, 1899.

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